PDVSA considers dramatic changes to revive Venezuelan oil production

CARACAS (Bloomberg) --New leadership at Petroleos de Venezuela SA is considering a major overhaul that could see the company streamlining its oil business and even forsaking decades of state monopoly, according to people familiar with the matter.

The proposal, outlined in a document seen by Bloomberg and dated March 2020, was devised by newly appointed PDVSA head Asdrubal Chavez, who is now in a position to pursue it, according to the people, who asked not to be named because the matter is private.

Under the proposed structure, the state-run energy company would eliminate its decade-long policy of holding majority ownership in its joint ventures. It also would outsource the marketing of its oil, according to the document. The draft is still subject to change and has yet to be presented to the company’s board, the people said.

Venezuelan President Nicolas Maduro on Monday named Chavez -- the country’s former energy minister and head of U.S. refining unit Citgo -- as the new head of PDVSA. He also appointed long-time ally Tareck El Aissami as the country’s oil minister, as crude prices crashed and U.S. sanctions aggravated nationwide gasoline shortages.

PDVSA didn’t respond to multiple requests for comment.

The plan, one year in the making, calls for PDVSA to dismantle non-oil affiliates and merge its European business into one Russia-based unit, the people said.

In theory, the reorganization would require current Venezuelan energy laws to be changed with the approval of the Constituent Assembly, a rubber-stamp body filled with regime loyalists. While it’s likely to be approved, the assembly lacks any sort of recognition internationally, which could hinder plans for foreign partnerships or investment.

Here’s what else is being proposed:

• The company hopes to produce 1 million barrels a day in the short term, compared to its current estimated production of 660,000 barrels a day
• Half of PDVSA’s 24 affiliates would be eliminated, including construction and farming projects
• Foreign offices and assets in Ecuador, Bolivia, Uruguay, Paraguay and Argentina are to be sold, leaving only some existing branches in the Caribbean and the U.S.
• International partners at nearly half of 46 joint ventures will take majority control
• The most productive PDVSA JVs, such as Rosneft’s Petromonagas, Chevron’s Petropiar, CNPC’s Sinovensa, will remain untouched
• PDVSA-only operated fields would be open to foreign investment